American Southern Insurance Company v. KHDM Construction, LLC et al

Filing 25

MEMORANDUM OPINION AND ORDER granting 16 MOTION for Default Judgment; A separate final judgment will be entered. Signed by Chief Judge Emily C. Marks on 10/17/2019. (amf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
AMERICAN SOUTHERN
INSURANCE COMPANY,
Plaintiff,
v.
KHDM CONSTRUCTION, LLC,
Defendant.

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CIVIL ACT. NO. 2:19-cv-185-ECM
(WO)

MEMORANDUM OPINION and ORDER
I.

INTRODUCTION

On March 14, 2019, American Southern Insurance Company (“Plaintiff”) filed suit
against KHDM Construction, LLC (“Defendant”) and Matthew L. McCarty1 for breach of
an Indemnity Agreement between the parties. (Doc. 1). The Plaintiff alleges that on
August 5, 2011, it entered into the Indemnity Agreement with the Defendant “[a]s a
condition of [the Plaintiff’s] issuance of surety bonds on behalf of the [the Defendant.]”
(Id. at 2).

Moreover, the Plaintiff contends that it has made payments under the

Defendant’s bonds and incurred attorneys’ fees in connection with the same. (Id. at 6-7).
The Defendant failed to file an Answer or otherwise appear in this lawsuit within
the time limits set forth in the Federal Rules of Civil Procedure. Accordingly, on July 18,
2019, the Clerk entered a default against the Defendant. (Doc. 12). On August 26, 2019,

1 The Plaintiff voluntarily dismissed Matthew L. McCarty pursuant to Federal Rule of Civil
Procedure 41(a)(1)(A)(i). (Doc. 22). Thus, Matthew L. McCarty is no longer a party defendant in this case.

the Plaintiff filed a Motion for Default Judgment (doc. 16), requesting that judgment be
entered in its favor against the Defendant in the amount of $863,649.83, which figure
represents the losses, costs, and expenses sustained by the Plaintiff as a result of issuing
surety bonds on behalf of the Defendant and enforcing the indemnity agreement. (Doc. 17
at 10) (Doc. 18 at 3). The Defendant did not file a response to the Plaintiff’s Default
Judgment Motion, although it had an opportunity to do so. (Doc. 23). For the reasons that
follow, the Plaintiff’s Motion for Default Judgment is due to be granted on the issues of
liability and damages.
II.

JURISDICTION and VENUE

This Court possesses subject matter jurisdiction over this case pursuant to 28 U.S.C.
§ 1332(a) because the amount in controversy exceeds $75,000, exclusive of interests and
costs, and complete diversity exists between the parties. Personal jurisdiction and venue
are uncontested.
III.

STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 55(a), the Clerk of Court must enter default
when “a party against whom a judgment for affirmative relief is sought has failed to plead
or otherwise defend, and that failure is shown by affidavit or otherwise . . ..” Further, “[i]f
the plaintiff’s claim is for a sum certain . . . the clerk – on the plaintiff’s request, with an
affidavit showing the amount due – must enter judgment for that amount and costs against
a defendant who has been defaulted for not appearing . . ..” FED.R.CIV.P. 55(b)(1).
Once a default has been entered, “[t]he defendant, by his default, admits the
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plaintiff’s well-pleaded allegations of fact, is concluded on those facts by the judgment,
and is barred from contesting on appeal the facts thus established.” Nishimatsu v. Const.
Co., Ltd. V. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). A district court
need not hold a hearing to determine damages when “all essential evidence is already of
record.” S.E.C. v. Smyth, 420 F.3d 1225, 1231-32 & n.13 (11th Cir. 2005).
IV.

DISCUSSION

A. Liability for Breach of the Indemnity Agreement
In support of its Motion for Default Judgment, the Plaintiff submits an affidavit of
John Northrop, its Assistant Vice President of Surety Claims for National Claims Services.
(Doc. 18). In his affidavit, Mr. Northrop attests to the execution of the subject Indemnity
Agreement, the issuance of surety bonds, payments made under the Bonds, and attorneys’
fees incurred. The Plaintiff also submits an affidavit from its attorney, Adrienne Fazio,
attesting to the attorneys’ fees and costs incurred “arising out of and connected to surety
bonds executed on behalf of KHDM Construction, LLC . . ..” (Doc. 19 at 1).
The Plaintiff’s allegations concerning the breach of the Indemnity Agreement and
supporting evidence provide a sufficient basis for the Court to enter default judgment
against the Defendant as to liability.
To establish breach of contract under Georgia law, a Plaintiff must prove three
elements: (1) subject matter of the contract; (2) consideration; and (3) mutual assent by all
parties to all contract terms. Broughton v. Johnson, 247 Ga.App. 819, 819, 545 S.E.2d 370,

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371 (2001). 2 Moreover, Georgia courts routinely uphold “the validity and enforceability
of indemnification agreements executed in connection with the issuance of surety bonds.”
Anderson v. U.S. Fid. & Guar. Co., 267 Ga.App. 624, 627, 600 S.E.2d 712, 715 (2004).
“When interpreting [indemnity] agreements, [Georgia courts] apply the ordinary rules of
contract construction.” Id. Importantly, “[n]o construction is required or even permissible
when the language employed by the parties in the contract is plain, unambiguous and
capable of only one reasonable interpretation.” Id.
In the instant case, the Indemnity Agreement specifies that the Defendant agrees “to
indemnify and save harmless [the Plaintiff] from and against any and all liability, loss,
costs, damages or expenses of whatever nature or kind and arising out of or in any way
connected with such [b]onds, including but not limited to fees of attorneys . . ..” (Doc. 181 at 1). Further, under the Indemnity Agreement, the Plaintiff “shall have the right in its
sole discretion to determine whether any suits or claims shall be paid, compromised,
defended, prosecuted or appealed and to pay out such sums as it deems necessary to
accomplish any of those purposes . . ..” (Id.) The Court finds this language unambiguous
and therefore, it must be strictly enforced. See Anderson, 267 Ga.App. at 627, 600 S.E.2d
at 715 (affirming summary judgment for a surety company based on similar language in
an indemnity agreement).

Thus, the Court concludes, as a matter of law, that the

Defendant’s failure to comply with the above provisions resulted in a breach of the

2 The Court analyzes liability for breach of the indemnity agreement under Georgia law because
paragraph 10 of the agreement reads, in part, “[t]his Agreement shall be interpreted and governed in all
respects in accordance with the laws of the State of Georgia.” (Doc. 18-1 at 4).
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Indemnity Agreement.
B. Damages for Breach of the Indemnity Agreement
The Plaintiff is entitled to a Default Judgment against the Defendant in the amount
of $863,649.83. The uncontested testimony of John Northrop (doc. 18) constitutes prima
facie evidence of the fact and extent of the Defendant’s liability. See Travelers Cas. & Sur.
Co. of Am. v. Winmark, 518 Fed. App’x 899, 903 (11th Cir. 2013) (holding that “[b]y
signing the indemnity agreement, the [defendants] expressly agreed that computer
printouts, verified by affidavit, would be prima facie evidence of the fact and amount of
loss.”); Anderson, 267 Ga.App. at 627-28, 600 S.E.2d at 715-16 (holding plaintiff’s
affidavits sufficient to establish liability and damages under the indemnity agreement).
Here, the Indemnity Agreement between the parties states “[i]n any claim or suit
hereunder, an itemized statement of aforesaid loss and expense, sworn to by an officer or
agent of [the Plaintiff], or vouchers or other evidence of disbursement by [the Plaintiff],
shall be prima facie evidence of the fact and extent of the liability hereunder of [the
Defendant].” The Plaintiff, through John Northrop’s affidavit, provides the evidence
necessary under the Indemnity Agreement to determine the extent of the Defendant’s
liability. Specifically, Northrop’s affidavit establishes that the Plaintiff issued payments
on behalf of the Defendant in the amount of $835, 591.58. (Doc. 18 at 2). Moreover, the
uncontested evidence shows that the Plaintiff has incurred attorneys’ fees arising out of its
efforts to enforce the indemnity agreement in the amount of $28,058.25. (Doc. 18 at 3)
(Doc. 19 at 1). The Defendant has not provided any response or evidence rebutting these
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amounts. Because “all essential evidence is already of record” the Court need not hold a
hearing to determine damages. See S.E.C., 420 F.3d at 1231-32 & n.13. Thus, the Court
concludes that the Plaintiff is entitled to Default Judgment against the Defendant in the
amount of $863,649.83.
V.

CONCLUSION

Accordingly, it is ORDERED that the Plaintiff’s Motion for Default Judgment (doc.
16) is GRANTED. A separate final judgment will be entered.
DONE this 17th day of October, 2019.

/s/ Emily C. Marks
EMILY C. MARKS
CHIEF UNITED STATES DISTRICT JUDGE

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